Franchise Tips & Advice - Inside Franchising

We are proud to bring you some tips from Troy Hazard, our resident Franchising Expert. Troy has been working with franchise groups since the late 80's in over 16 different countries around the world. On these pages, you will find articles on:

Help - I need somebody!

When you're starting out on your franchise adventure it is sometimes hard to know who to turn to for advice, support and mentorship. There are so many lawyers, accountants and consultants out there that are all offering "franchising" as one of their core competencies.

So how do you sort out the pretenders from the professionals?

First and foremost you should know who they have worked for. Find out what brands they have worked for and waht they did for them. And, can you call some of these clients and get a feel for how that business relationship worked?

The next think to do is talk to some franchisees and franchisors in the marketplace and see if you can get a referral. People in business rarely offer referral sunless they really believe these people know what they are talking about.

And last, but not least: when you've got your shortlist together based on their skills and ability, take the time to interview them and work out who you think you'd like to work with - because at the end of the day you are going to share some really intimate details with these experts - financially and personally and you don't want to feel like you're being invaded by the enemy.

Professional and consultants can be great tools for your business - but only if you really want them to be.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

The Disclosure Document

When the Franchising Code of Conduct was introduced so to was a document called the Disclosure Document. Franchisors are required to give you this document as part of your due diligence on their system. Within it you'll find a couple of key things - one being how many legal issues has had to deal with in recent times and how many stores have been bought and sold lately. Be sure to ask your Franchisor the hard questions in relation to these two issues because this will tell you if this is a good system or one you should reconsider.

Click here for more information on the Franchising Code of Conduct

Guarantees

Guarantees in franchising are a really interesting topic – what a fantastic thing in any business – guaranteed income!

But there are a couple of things to look out for: make sure you’ve got some really serious legal advice just to make sure there is no fine print in there. And the second thing is you need to ask yourself – are you buying this franchise because of the guarantee or because you’ve really got some passion for the business and you can really see yourself working in it everyday?

Remember, at the end of the day it’s a three or five or ten year contract and you have still have to turn up every day of the week.

Can’t Beat Communication

If you look back over history a considerable amount of the disputes and mediation in franchise systems boil down to poor communication between a franchisor and a franchisee.

In our experience it’s the single biggest problem that we suffer in franchising.

But there are some really simple rules you can put in place to avoid poor communication in any system:

Rule 1 is to communicate expectations early in the relationship.

As a franchisor you need to be able to communicate how to me how you expect that relationship working from day one. Other wise human nature will just kick in and I’ll just make up my own answer to the ending.

As a franchisor, the key to communication is humility and a ‘friendly but firm’ approach to the way you communicate business issues to me.

As a franchisee the key is to stop, think, construct, speak. Because in the heat of the moment it’s sometimes easy to say things we don’t really mean.

Rule 2 is talk to me not at me

Consider how you are delivering your communication.

Talk to me in a language you’d like to receive as opposed to one you’d like to tell. That way you’re opening up conversation and not shutting it down.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

Culture

I've got a really simple view when it comes to analysing the best performing systems here in Australia and it boils down to one thing - culture If the franchisor has enthusiasm and commitment to their business then chances are they're going to do the same for yours as a franchisee. It'll set them apart from their competitors every day of the week!

Franchisee Leprosy

Every now and then I come across a franchise system that is in trouble, and one of the common things we see when we do strike a system under pressure is what we call 'Franchisee Leprosy'.

This is an unusual disease in franchising, and it can often go undetected for months before the symptoms start to show. It starts with one franchisee showing signs of illness, and then another with the same problems, and then before you know it an entire city of state have caught it.

So what is Franchisee Leprosy?

Well it's initially brought about by an unfortunate Australian habit, something we particularly see in business, when a small business owner becomes their own self-fulfilling prophecy. By that I mean, if you say things are tough and business is bad, then before long of course it will be.

When you combine this powerful state of mind with 50-100 outlets all selling the same product under the same banner, it can become quite disruptive to a franchise system.

This disease in franchising is usually brought on by one or two operators that are jaded, or tired of working within the system - and to be frank - should have maybe sold a while back and moved on.

Instead they decide to stay for whatever reason and use their energy for evil not good. They figure that if they can convince enough of the operators in the system that the business is tough they can put pressure on the franchisor to reduce fees or change the way the business is run. In other words, externalizing the issues.

So how do you change that in a franchise system?

From a franchisor's perspective, watch for the operators in your system that are always having trouble making sales or growing their business, particularly when the rest of the group is doing well. Take a particular note of their mood or response in relation to your suggestions for change, and your encouragement of them to try new things in the business to drive it harder. A total brick wall and a poor attitude is a sure sight of leprosy.

At this point I like to get the operator to 'go shopping' and to spot other retailers that are clearly not wanting to be in their business either.

The simple question to ask is 'would you shop there with a person that offers that kind of vibe in the business?' Of course not. Then there is your answer for a cure to leprosy.

From a franchisee's perspective the simple prevention from the disease, is don't hang out or listen to those that have got franchise leprosy, cause they only want you to catch it so they feel better that they are not alone.

The answer: take control of your attitude, your business and your destiny and you'll be immune from the disease.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

Meaningful marketing

In about 70% of the franchise systems in Australia the franchisees contribute to a marketing fund, with the contribution mainly being a percentage of sales.

The purpose of the fund is to use the collective energy and money from all of the operators to help drive brand awareness and of course sales.

This works well in most systems, but there are a couple of key things to the set up and structure of that fund that make it successful.

The first of these is that it's a two way street. Just because the franchisees contribute to the fund doesn't mean they should abdicate their responsibility for marketing their business.

Both franchisor and franchisee have responsibilities if you are to market the system successfully.

In line with this it is important that there is transparency on where the fund is being spent. The Franchising Code of Conduct makes provision for this, but over and above that there needs to be a clear line of communication between franchisor and franchisee, on what the desired outcomes are for the marketing fund for that year.

The second key point to making the fund a success is to have a structured, well planned and focussed annual campaign on where the funds are going to be spent.

This means structuring the campaign over a number of key levels.

The first is a national level - this is the activity you wish to execute in relation to the development, positioning and protection of the brand.

The second - an area campaign - what can you do as regions within your marketing campaign.

Next, is a local marketing campaign - this is the activity you will be executing as a franchisee in your local ara, back to that joint effort I referred to.

There is also a need for a structured training programme in your campaign - operators and staff alike need to be clear on what is going into the market if they are to be able to support the campaign with meaning.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

The Common Bond – The Customer

There is an ongoing quandary in franchising how can we make something so standard and yet cater for individuals’ needs.

How can we all look the same, be the same, sell the same, and do the same, when our customers and areas are so different?

For years I’ve heard these words bleated by both franchisors and franchisees alike ...

‘But you don’t understand, it’s different for me, my customers are different, they are richer, poorer, slower, faster, dumber, smarter, they don’t like the things you are making me sell.’

‘I can’t run that promotion, it won’t work in my area, you just don’t get it I need something that suits ME!’

This is a killer perception in franchising and the cause of a lot of disruption in the relationship between franchisor and franchisees.

We’ve worked in countries across the globe, different cultures, different languages, and different lifestyles, in Australia alone we have files on over 300 territories, cities and suburbs.

We’ve sold pizzas, cars, tyres, homes, ice cream, donuts, health care, gifts, pool care, and a range of weird and unusual services that have been franchised around the planet.

And there is one common bond between all of these businesses that make them ALL the same - their customers!

Customers want a business relationship. By having strong relationship your customer feels more confident about their choice.

And they want value. Importantly value does not always equally cheap or for that matter relative to money at all.

The interesting thing to note here is that if service, quality, relationship and ease are present in the transaction, then your customers will be given the ‘perception’ of value automatically.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

If you're having trouble deciding which way to go with your potential
franchisee opportunity then drop into the Franchisee Expos in your area.

These events happen throughout the year in capital cities around the country
and they are a great opportunity for you to see a fantastic number of
different franchise systems under the one roof. For a modest entry fee you
can talk to franchisors, and franchisee, gather information on systems and
their offers, and attend some of the many workshops they have over the few
days.

You'll also find the Franchise Council of Australia stand where you can
purchase books and information on the category and talk to people who can
answer questions on a range of topics.

Keep your eye out on the Inside Franchising website for more information
when a show will be on in your area, and go for a wander!

As consultants, we get so many people come through our front door with a ‘great idea’ they want to franchise. In some cases they really only have an idea, and no idea on how to turn that into a franchise. In other cases they do have a great little business that lends itself to franchising.

I’m going to give you the 2 minute microwave version of the questions we would usually ask over 2 days … just to get you thinking!

The first question we ask is: Have they run a pilot of the business they are about to franchise? Franchising is about delivering a proven system and business model. It’s much harder, and dangerous, to franchise something that has not been done … duplicating something that is already a success elsewhere is much easier to sell.

In short, as a potential franchisee looking to buy into your vision, I want history, and I want proof of concept.

From there we can move to what we call an operational audit. Where we establish what documentation the potential franchisor currently has in place:

Is there a business plan to support these manuals and systems, and can you transition that from a single outlet model to a multiple outlet franchise style business model?

Then there are the business strategy questions because as soon as you become a franchisor, you stop selling widgets, and start selling stores.

So, in line with that: what staff do you currently have in place to run your existing business, and what staff do you need to support your franchise system?

What will be the franchise offer? What services are you going to provide? How often you will provide them and how will you charge for that?

And last but certainly not least … Do you have adequate capital to fund the initial stages of franchising? There is a considerable cost to the legal documents, accounting costs and the development of operational documents and systems.

It’s a big thing, the challenges are not insurmountable, but there is a lot to think about when you start on your journey to become a franchisor.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

Let's assume you have done some homework on a few systems and created your short list of potential franchise opportunities.

So let's assume you have done some homework on a few systems and created your short list of potential franchise opportunities.

Take your list and apply these simple questions to each of the opportunities you've selected, don't fudge it, this is a big investment and you can't let the romance of buying a business get in the way of good business sense.

1/ Do you REALLY see yourself working in the business all day every day for the next 5 years.

2/ Do you feel a connection with the franchisor? Franchising is a marriage, and as such you need to know you can move forward together and live happily ever after, because divorce in franchising is just as hard as the real deal.

3/ Will the business provide you the lifestyle you anticipate? If so then HOW is the business going to provide you with that lifestyle?

4/ Have you talked to other franchisees in the system, these guys are in there doing the do already, how do THEY feel about the business.

5/ Can you see the potential for growth , and I mean growth on a number of levels, growth as a person, growth as a businesses and growth as a franchise system.

6/ Have you read and do you understand the disclosure document provided by the franchisor. This is you road map to the history of the system and an important document.

7/ Have you done a financial forecast on the business? How long it will take you to make money, remember the start up phase in a business ALWAYS takes twice as long and costs twice as much, so you'll need the cash for a rainy day with an expectation of rain from day one.

8/ Are you clear on roles and responsibilities? Do you understand what is expected from you as a franchisee and are you clear on the services the franchisor is going to provide.

When you've applied the questions to all of your potential opportunities you'll start to see the clear winners, and you'll be in a position to conduct a more focused interview with your potential franchisor and make a more qualified decision.

In the meantime, we have a simple Franchise Suitability Test for you to find out whether you're suited to franchising.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.

Franchising has changed a lot in recent years, and as a potential franchisee trying to enter the market it's sometimes really difficult to find your way through the clutter of opportunities.

The first thing you've got to do is visualise yourself in the business. You have to really believe you can be that person in that franchise - by way of example: you might like to drink coffee, but do you want to stand on your feet all day and make it.

Franchising is a really unusual bond between franchisor, franchisee, the store and the customer, so to create that bond you need to start with a short list. The places to look for that short list are the Inside Franchising website, the Annual Franchise Directory or the Saturday paper.

And don't think you need to make your entire list from the same category. You might like to look for an outdoors franchise, a services franchise or a retail franchise - look for things you like to do.

Once you've got your list then we're going to work out how to analyse it and we will be looking at that in the coming weeks.

Be sure to register as a member of the Inside Franchising Club to receive our Newsletter with more tips and expert advice from Troy.